A scheme to boost pensions will be unveiled today by pensions minister Steve Webb

Pensioners are to be given the chance to boost their state pension by up to £25 a week.

They will be allowed to make top-up payments which will increase their retirement income for the rest of their lives.

The scheme, available to anyone who has already reached state pension age or will do so by April 2016, will be unveiled today by pensions minister Steve Webb.

He expects it to be particularly attractive to women, who tend to live longer and so will get a better return on their contributions.

It will also help the self-employed, who currently qualify for only the basic state pension.

Under the plan, pensioners will be allowed to pay from as little as £900 to as much as £25,000 to top up their pension.

By doing so they will increase their weekly state pension by around £1 for every £900 paid in.

The precise return will be calculated depending on an individual’s age. So for a person in their mid-70s, not expected to live as long as someone just approaching pension age, it would be significantly greater.

Figures have yet to be finalised, but it is expected the maximum top-up will be set at between £20,000 and £25,000.

That would mean someone paying in the maximum earning an index-linked boost of £25 a week for life. That is an extra £1,300 a year – so a person living 30 years beyond pension age would gain £39,000.

The deal, which rises in line with inflation, is significantly better than is available privately.

To get the same type of payout from an insurance company, retirees would need extra savings of some £38,000.

Pensioners will be allowed to make top-up payments which will increase their retirement income for the rest of their lives

The scheme is aimed at those reaching pension age before the new higher flat rate state pension of £155 a week is introduced on April 6, 2016.

It will be launched formally within weeks and be open for 18 months from October next year.

Mr Webb told the Daily Mail: ‘Many pensioners have been getting a very poor return on their savings in recent years. This scheme will give them a guaranteed, index-linked return and will be particularly attractive for women pensioners who will draw the higher pension for longer.’

Historically women have earned less than men and taken time off to have children, causing gaps in their National Insurance payments.

As a result, they have lower state pensions. Currently, the average weekly state pension is £148 for a man and £131 for a woman. About 2.8million women receive less than £80 a week and 4.2million self-employed qualify for only £110.15 a week.

The minister expects it to be particularly attractive to women, who tend to live longer and so will get a better return on their contributions

In a separate reform aimed at existing workers, Mr Webb also backed the idea of changing the law to allow them to invest in European-style collective retirement schemes.

The reform is expected to be part of a new Pensions Bill likely to be included in the next Queen’s Speech.

Collective defined contribution schemes pool members’ contributions so that pensions are paid from a collective fund rather than from individual accounts.

Defined contribution funds are currently the most popular type of scheme in the UK. Ministers believe that by allowing firms and workers to pool contributions, retirement incomes can be boosted by an average of more than a third.

Because of their size, such schemes can offer better value and more flexibility than most existing funds. Investment risk is shared between savers, reducing the chances of an individual being hit by stock market downturns.

Pooled funds also cut bureaucracy and administration charges.

‘Some of the best pension schemes in the world are run on a collective defined contribution basis,’ said Mr Webb, a Liberal Democrat. ‘I would like to see British workers have access to schemes run on this basis.’